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Unformatted text preview: quantity on x 2 the monopolist reduces profits from Type 2, but increases profits from Type 1 x 1 x 2 x 2 x 2 ’ x 2 ’ x p D 1 x p D 2 MC So the marginal increase in profits is  . x 1 x 2 x 2 x 2 ’ x 2 ’ x p D 1 x p D 2 MC By how much do we decrease x 2 to maximize profits? Until gain in profit=loss in profit. x 1 x 2 x 2 x 2 ’*[ x 2 ’* Oligopoly April 7 Econ 100A Prof. Reynolds Find firm 1’s best response function when market demand is x=102p and marginal cost is constant $2 A. x 1 = (6x 2 )/2 B. x 1 = 3 B. x 1 = (10x 2 )/2 D. x 1 = (6x 2 )/3 C. Something else How would we determine monopoly output & profit? What quantities will firm 1 & firm 2 produce? A. Firm 1: Firm 2: B. Firm 1: Firm 2: C. Firm 1: Firm 2: D. Firm 1: Firm 2: E. None of the Above Are firm 1 & 2’s combined profits larger than a monopolist’s profits? A. Yes B. No C. Can’t Tell...
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 Spring '08
 Woroch
 Economics, Monopoly, Prof. Reynolds

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